GIC invests $549m in US energy firm

The Government of Singapore Investment Corporation (GIC) has bought an 11 per cent stake in United States-based energy infrastructure firm AEI for US$400 million (S$549.2 million).

The investment followed a recent foray into the lucrative sector by another Singapore investment company, Temasek Holdings, and came as oil traded at unprecedented prices.

GIC said yesterday it met AEI late last year when the American firm was seeking to raise capital.

A spokesman said GIC ’sees it as an opportunity to make a substantial investment in AEI until the American firm achieves a stock exchange listing’.

He added that the investment would help GIC gain exposure to the growing energy infrastructure markets of the developing world, the focus of AEI’s business.

GIC Special Investments, GIC’s private equity arm, purchased the shares from AEI and some of its shareholders.

Mr George Kay, vice-president of GIC Special Investments’ London-based global infrastructure group, has been appointed to AEI’s board.

Privately-held AEI owns energy infrastructure businesses in several emerging markets, including China, Mexico and Argentina. Its revenues last year exceeded US$3.2 billion.

Temasek recently set up a unit to invest in energy exploration and development.

Oil sets new high for fifth straight day

Oil prices leapt to a new peak of more than US$126 a barrel yesterday, hitting a record for the fifth straight session, in a market given an additional spur by tight supplies of diesel.

United States crude for delivery next month rose as much as US$2.51 to US$126.20 a barrel. London Brent crude rose US$2.81 to US$125.65 per barrel.

Wall Street opened sharply lower, in response to the latest hike and news that insurance giant AIG had reported a deeper-than-expected quarterly loss.

At 11pm Singapore time, the Dow Jones Industrial Average was down 89.56 points at 12,777.22.

‘I’m not particularly surprised by the speed of the rise in crude. There are many market bulls hoping for prices to rise heading into the summer,’ said Mr Tetsu Emori, a fund manager at Astmax in Tokyo.

Gains in US crude picked up momentum after distillate stocks in America, notably diesel, fell.

The US said on Wednesday that domestic distillate stocks, which include diesel, fell by 100,000 barrels last week, against forecasts for an 800,000-barrel rise.

The tightness in the stocks was also highlighted after Royal Dutch Shell looked set to shut its second-largest crude distillation unit and two secondary units at its Singapore plant next month for routine maintenance.

$20m carrot for building owners to go solar

By Jessica Cheam, ST

Tapping the sun’s energy has just been made easier for building owners.

The Government yesterday announced details of a $20 million scheme that could see as many as 100 solar projects sprout around Singapore in the next two years.

The carrot being dangled in front of private developers and building owners is a subsidy that trims the cost of a solar project by 30 per cent to 40 per cent.

The grant is capped at $1 million for each project.

Solar projects usually cost from $100,000 to a few million dollars, depending on the scale and technology used.

‘This is a very attractive offer… We expect keen interest from the industry,’ said Economic Development Board (EDB) managing director Ko Kheng Hwa, who unveiled the initiative yesterday at the annual Semicon Singapore conference at Suntec City.

The top priority of the Solar Capability Scheme, said Mr Ko, is to build up a critical mass of projects so as to develop manpower capabilities in Singapore’s fledgling solar industry.

‘We are focusing on boosting the demand side…so the local professionals will learn how to design good solar systems.’

The scheme, first mooted by Senior Minister of State for Trade and Industry S. Iswaran in Parliament in March, is the Government’s latest answer to increasing calls for incentives to kick-start the solar industry.

The sector has attracted headline investments in the last year, including a $6.3 billion giant solar manufacturing plant that Norwegian firm Renewable Energy Corp is building.

‘This scheme will go a long way in building up critical capabilities among various players in the solar energy ecosystem,’ said Mr Ko.

It starts with immediate effect and applies to new private buildings that meet a minimum Green Mark Gold standard, according to the EDB.

The Green Mark is a rating system developed by the Building and Construction Authority that rates buildings for their environmental impact and performance.

Developers like City Developments have already incorporated solar systems into new condos, which have been given the Green Mark stamp of approval.

Some factors that will determine the grant size include innovation, design, effectiveness and skills development, said Mr Ko.

The EDB also announced yesterday a new international advisory panel for clean energy that will hold its first meeting next month.

Industry players like Mr Christophe Inglin, the managing director of solar firm Phoenix Solar, hailed the new scheme, saying: ‘It’s the best news the industry has received for some time.

‘We’ve seen an increase in interest in solar systems. Hopefully, this boost will convince clients that solar is the way to go.’

Oil rises to US$122 on fresh supply fears

Oil set a new record high of US$122 a barrel yesterday, the latest spurt in an advance that has seen prices double over the past 12 months.

Supply disruptions in Nigeria, where a strike and attacks by militants have hit production, helped boost a market that is nervous about any threats to supply.

Adding to the tense climate was Iran, the world’s fourth-biggest oil producer, when it refused to accept intrusive inspections of its nuclear programme, which the West fears could be linked to weapons.

US light crude for June delivery rose as much as US$2.03 to US$122, while London Brent crude climbed US$2.36 to a record US$120.35.

Goldman Sachs has predicted that oil could soar towards US$150 to US$200 a barrel because of a lack of adequate supply growth.

‘The possibility of US$150 to US$200 per barrel seems increasingly likely over the next six to 24 months, though predicting the ultimate peak in oil prices as well as the remaining duration of the upcycle remains a major uncertainty,’ the bank said.

Oil has nearly doubled in the past year and is up by a quarter since the start of this year, partly because of the problems in Nigeria, as well as weakness in the US dollar, which has boosted the price of commodities.

Sizzling hot: Cooking oil prices on the boil

By Jessica Lim & Esther Tan, ST

While rice has grabbed the headlines, the price of cooking oil has also been on a steady march north, driven by failed crops and competition from new-age biofuels.

In the last two months, retail prices have jumped between 9per cent and 56 per cent, depending on the brand, according to a survey released yesterday by the Consumers Association of Singapore (Case).

The cheapest oil available to consumers at major supermarkets here is the Cabbage brand of vegetable oil at $4.90 per 2kg bottle.

But even this is up from $4.50 in March. Its Knife brand counterpart – a premium brand – costs almost twice as much, according to the Case study, which was based on checks at eight supermarkets.

The association’s survey is the first on monthly food prices and will be published on its website, www.case.org.sg.

Rising retail prices reflect a global trend in increased edible- oil prices, say importers.

They have seen prices more than double in the last three years. A tonne of refined liquid palm oil – the industry benchmark – costs US$1,200 (S$1,630), up from about US$450 in 2005.

Recent reports show that global edible oil prices rose 15 per cent in the first two months of this year.

The price increases have been driven by decreased crop yields due to climate change and competition from biofuels, which are made from the same plant extracts.

Said Mr Wong Mong Hong, deputy president of the Food Manufacturers Association: ‘I have been in the industry for 38 years and this is the second time prices have been this high. The last time was in 1982 when there was a palm-oil shortage. This time, biofuels are the culprit.’

He said about 12 per cent of cooking oil produced by the world is now being directed to biofuels, a much-touted and clean-burning alternative to fossil fuels.

Demand for biofuels is expected to expand by almost 20per cent per year through 2011 despite recent concerns about their impact on the environment and world food supplies.

Price-conscious consumers ‘can get around the price hike’, said Case president Yeo Guat Kwang, by ‘looking at their budget and comparing prices at different supermarkets’.

He said: ‘Vegetable oil is among the cheapest kind of oil, while other types of oil, like sunflower oil and canola oil, are more expensive.’

However, vegetable oil, popular with hawkers, is still prone to wild jumps.

Said Mr Wong Shu Kiat, 43, owner of a coffee shop in Serangoon: ‘Prices have fluctuated from about $10 to about $40 these three months. It cannot be helped. What matters is business must be good.’

Mr Chen Kern Wuan, president of the Newton Hawker Centre Stallholders Association, said hawkers usually refrain from changing the types of oil they use. But they may soon have to.

Mr Chen added: ‘We will think of switching types of oil if things get worse, but we try not to do that because the taste of our food might change.’